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An Effective, Responsible Stimulus

President Bush got more specific yesterday about what he wants to do to help the economy. During a trip to meet with business leaders in New York, Mr. Bush revealed he was aiming for $60 billion to $75 billion in tax cuts and new spending, over and above the $40 billion already pledged for recovery from the terrorist attacks. It was a promising start, and the administration should now start working with Congress to deliver a stimulus package as quickly as possible.

Under the president's plan, the total stimulus would amount to 1 percent of gross domestic product, enough to give the economy a good shot in the arm. But its effectiveness will depend on how the relief is delivered. Mr. Bush listed a range of options yesterday, some of which are much more likely to work than others.

To help businesses the president suggested a range of tax breaks, including temporary tax credits for new investment, accelerated write-offs for spending on buildings and equipment, and a cut in the corporate income tax. The first of these is the best, since it would directly encourage companies to start spending. Accelerated write-offs are less precisely targeted. They would cut the cost of existing assets as well as new ones, and companies' savings might or might not be used for growth. Of least use is a cut in the corporate income tax, which would have little if any effect on businesses' decisions on investment and employment.

To help consumers, the president suggested extending the duration of cash benefits and health coverage for the unemployed, more tax rebates and accelerating his existing 10-year package of tax cuts. Extending unemployment benefits is important, particularly for people who lost their jobs as a result of the terrorist attacks. Those workers probably were not searching for new jobs before Sept. 11, and they will have trouble finding new positions in hard-hit industries like tourism and transportation. Longer support will give them time to find better matches for their skills.

Tax rebates would certainly give consumers a boost, especially if the rebates went to lower-income Americans whose purchases are most constrained by their earnings. But accelerating the tax cuts the president has won from Congress makes less sense. Most of that relief would go to people who are already relatively wealthy, and whose spending decisions are less sensitive to an infusion of extra cash. The fact that so much of the Bush tax cuts kicks in somewhere in the future is one of the reasons they have not done more to help the economy. A more important explanation is that they were directed at the wrong people.

Rather than make them happen sooner, Congress should eliminate some of those tax cuts completely, to raise money for more effective stimuli and to reassure the markets that the nation is not plunging into a long series of serious budget deficits.